NON-RECOURSE INDEMNITY AND SECURITY AGREEMENT
Exhibit 10.1
This Non-Recourse Indemnity and Security Agreement (this “Agreement”) is made and entered into
as of September 14, 2007, by and between CAPITALSOUTH BANK, an Alabama banking corporation (the
“Bank”), and XXXXX X. XXXXX, a resident of Xxxxx County, Florida (“Indemnitor” or “Xxxxx”), and is
joined in by CAPITALSOUTH BANCORP, a Delaware corporation and a registered bank holding company
(“CapitalSouth”), with respect to Section 32 and Exhibit A of this Agreement.
R E C I T A L S :
A. The Bank is a wholly-owned subsidiary of CapitalSouth Bancorp, a Delaware corporation and a
registered bank holding company (“CapitalSouth”).
B. CapitalSouth and Monticello Bancshares, Inc., a Florida corporation and a savings and loan
association holding company (“Monticello”), have heretofore entered into that certain Agreement and
Plan of Merger dated February 28, 2007 (the “Merger Agreement”), which is joined in by Indemnitor.
C. Mortgage Lion, Inc. (“Mortgage Lion”) is a wholly-owned subsidiary of Monticello Bank, a
federal savings bank (“Monticello Bank”), which in turn is a wholly-owned subsidiary of Monticello.
D. In connection with the consummation of the Merger Agreement, it is also contemplated that
Monticello Bank will be contemporaneously merged with and into the Bank.
E. Indemnitor is the principal shareholder of Monticello and is desirous of the transactions
contemplated by the Merger Agreement being consummated.
F. Monticello Bank and/or Mortgage Lion are parties to various agreements pursuant to which
loans are sold by them to investors (“Loan Purchasers”).
G. In connection with consummation of the Merger Agreement, Indemnitor is to be issued a
promissory note by CapitalSouth in the original principal amount of Eight Million Dollars
($8,000,000) (the “Original Promissory Note”). CapitalSouth and Indemnitor hereby agree that
CapitalSouth shall bifurcate the Original Promissory Note and issue to Indemnitor one promissory
note in the original principal amount of One Million Five Hundred Thousand Dollars ($1,500,000)
(the “Pledged Note”) in order to fund any indemnification obligations of Indemnitor under this
Agreement. CapitalSouth shall issue to Indemnitor a second promissory note in the amount of Six
Million Five Hundred Thousand Dollars ($6,500,000) (the “Non-Pledged Note”), which the parties
hereto agree shall not fund any indemnification obligations of Indemnitor under this Agreement.
The amortization schedule for each of the Pledged Note and the Non-Pledged Note will be contained
therein, and CapitalSouth and Indemnitor hereby agree that the Pledged Note will not begin to
amortize until the final
payment to Indemnitor of all principal and interest owed to Indemnitor
under the Non-Pledged Note is made by CapitalSouth.
H. As further consideration hereunder, CapitalSouth is willing, to the extent provided herein,
to permit Indemnitor to convert a portion of the Non-Pledged Note to CapitalSouth common stock, and
to grant to Indemnitor certain registration rights with respect to the shares of CapitalSouth
common stock that Indemnitor receives pursuant to his conversion of the Non-Pledged Note.
I. CapitalSouth and the Bank seek tangible assurance that Monticello Bank and Mortgage Lion’s
estimated liability with respect to repurchase obligations, indemnities and damages to Loan
Purchasers is not inconsistent with CapitalSouth assumptions.
NOW, THEREFORE, in consideration of the premises, the mutual covenants contained herein, and
for Ten Dollars ($10.00) and other good and valuable consideration paid in hand by the Bank to
Indemnitor, the receipt and sufficiency of which are hereby acknowledged by Indemnitor, the parties
hereto, intending to be legally bound, do hereby agree as follows:
1. Indemnitor hereby assumes all liability for, and undertakes without condition, limitation
or reservation of any kind, except as expressly provided herein, to pay, protect, defend, indemnify
and save Bank and CapitalSouth harmless from and against any and all claims, damages, losses,
liabilities, obligations, settlement payments, penalties, assessments, citations, directives,
litigation, demands, judgments, suits, proceedings, costs, disbursements and expenses of any kind
or of any nature whatsoever, including attorney’s fees and expenses (collectively, “Claims”) which
may at any time, subject to the limits set forth in Sections 3, 4 and 5, be imposed upon, incurred
by or asserted or awarded against any of the Bank, Mortgage Lion, Monticello Bank, Monticello,
CapitalSouth, or any of their respective officers, directors or employees, and arising, directly or
indirectly, from or out of or in any way related to (i) any breach or alleged breach or violation
of any obligation, or an obligation to repurchase a loan or indemnify the original purchaser
thereof, existing under or pursuant to any agreement, understanding, instrument, representation,
assignment, endorsement or conveyance, of any type or nature, affecting or relating to the sale or
transfer of any loan of any type or nature, including mortgage loans, construction loans, home
equity loans, home equity lines of credit, letters of credit or installment loans by Monticello
Bank or Mortgage Lion to a Loan Purchaser, occurring on or prior to the “Effective Time of the
Merger” under the Merger Agreement (each a “Covered Loan”), whether or not caused by or within the
control of Indemnitor, Mortgage Lion, Monticello Bank, Monticello or CapitalSouth, and (ii) any
claim, suit, demand, including the settlement thereof and any expenses, including attorney’s fees,
disbursements, costs of investigation, expert fees, court fees, mediator fees and arbitrator fees,
relating to any Covered Loan sold, transferred or hypothecated to a third party by any of Mortgage
Lion, Monticello or Monticello Bank prior to the Effective Time of the Merger, whether sounding in
contract, tort, statutory claim or otherwise, and whether such claim, suit or demand is brought,
known or knowable prior to or after the Effective Time of the Merger.
2
2. For purposes of this Agreement, amounts subject to indemnification under Section 1
(“Indemnified Costs”) which are of the following nature shall be determined as specified below:
a. Indemnified Costs which are out-of-pocket expenses, such as
indemnification payments by the Bank, settlements, attorney’s fees, consultant
fees and the like, shall be the actual amount paid by the Bank. Any subsequent
recoveries, reductions, reimbursements or discounts with respect thereto, such
as damages or indemnity payments from third parties, shall be deducted from
Indemnified Costs which are incurred or, to the extent such was paid by the
Indemnitor, reimbursed thereto.
b. The Indemnified Costs with respect to a repurchased loan shall be equal
to (i) the gross sum paid to repurchase such loan, including principal, return
of any premiums originally paid by the purchaser with respect thereto, accrued
interest, and any other amounts asserted by the purchaser, and reasonably
accepted by the Bank, less (ii) the fair market value of such loan, which, in
the Bank’s full and absolute discretion, may be the amount for which such loan
could be reasonably expected to be sold to another purchaser on a non-recourse
basis subject only to representations with respect to title to such loan, or,
in the case of a defaulted Covered Loan, the fair market value of the
collateral therefor, as determined by a third-party appraisal.
c. The Indemnified Costs shall not include internal costs of the Bank
and/or Mortgage Lion incurred in connection with responding to any claims with
respect to Covered Loans except with respect to personnel, if any, whose
primary responsibility relates to working with or managing Claims, and in any
event such internal costs shall exclude allocations of overhead, costs
associated with any compensation payable to Indemnitor, and any allocation of
executive management compensation with respect to the Bank.
d. All amounts shall be computed in accordance with generally accepted
accounting principles, consistently applied, but shall include appropriate
reductions or credits for any federal and state income tax savings with respect
thereto.
3. Notwithstanding anything else to the contrary contained in Section 1, Indemnitor shall have
no liability or obligation with respect to otherwise Indemnified Costs, until the Indemnified Costs
incurred or accrued reach Two Million Five Hundred Thousand Dollars ($2,500,000) (the “Threshold
Amount”), commencing as of August 31, 2007.
4. Notwithstanding anything else to the contrary contained in Section 1, Indemnitor shall have
no obligation under this Agreement with respect to any Indemnified Cost which both (i) first occurs
or is accruable after the fourth anniversary of the Effective Time of the Merger and (ii) the basis
of which was not known or reasonably expected as of
3
such fourth anniversary date; that
is, Indemnitor shall continue to be responsible with respect to any Indemnified Cost even
if incurred after such fourth anniversary date if any similar or related Indemnified Cost with
respect to a given Covered Loan had begun to be incurred or accrued prior to such fourth
anniversary date or if on or prior to such fourth anniversary date a reasonable person would expect
Indemnified Costs to be incurred with respect to one or more specifically identified Covered Loans.
The parties agree to negotiate in good faith to determine an appropriate reserve amount for any
Indemnified Cost which is expected to be incurred or accrued after such fourth anniversary date.
Indemnitor’s liability under this Agreement shall not exceed such reserved amount. If the parties
cannot agree on such reserve amount, any differences between their estimated future amounts may be
withheld by the Bank as a reserve but shall be released to Indemnitor at such time in the future
that the parties agree or such Indemnified Costs are otherwise finally determined. At such time,
the remaining balance, if any, of such reserve shall be released to Indemnitor, together with
interest which, in addition to any other amounts of interest already payable upon such reserve
(i.e., if it continues to be held in the form of the Pledged Note or a portion thereof) will equal
a rate on such amount due to be released to Indemnitor of not less than ten percent (10%) per annum
from the fourth anniversary date.
5. Notwithstanding anything else to the contrary contained in Section 1, Indemnitor shall be
responsible for payment of only fifty percent (50%) of all Indemnified Costs (the “Indemnified
Obligation Share”) above the Threshold Amount and shall be absolutely limited to a maximum amount
of One Million Five Hundred Thousand Dollars ($1,500,000) (the “Maximum Amount”). Amounts which
are due by Indemnitor shall be deducted immediately from the principal balance which is due and
owing under the Pledged Note or otherwise, or at the election of Indemnitor (or in the event that
the Pledged Note has been converted, in whole or in part, to another form of Collateral), paid in
cash or its equivalent by the Indemnitor to the Bank not later than thirty (30) days after the
presentation to the Indemnitor of an invoice with respect thereto. Upon request of the Bank,
Indemnitor shall promptly execute an acknowledgement with respect to the reduction of any principal
amount from the Pledged Note or other obligation held as Collateral. Notwithstanding anything else
to the contrary contained in Section 1, if and when the principal balance of the Pledged Note has
been reduced to zero, all obligations of Indemnitor under this agreement shall cease, and
Indemnitor shall not owe any further amounts for any Indemnified Costs.
6. The Bank and Indemnitor contemplate mutual cooperation with respect to minimizing the
amount of any Indemnified Costs. In that regard, the Bank contemplates permitting Indemnitor an
active role, so long as he diligently and effectively pursues such, in the administration of
Claims. In that regard, Indemnitor shall not be deemed an employee or agent of the Bank but shall
regularly consult with the Bank. Notwithstanding the foregoing, the Bank and Mortgage Lion shall
have full and absolute discretion in dealing with any Covered Loan and incurring any Indemnified
Cost, whether before or after the Threshold Amount is reached. Indemnitor shall have no right to
assume defense or consent or not consent, reasonably or otherwise, to any action or settlement
which may be brought or effected by the Bank and/or Mortgage Lion in good faith. Nothing in this
Agreement shall limit the full and absolute discretion of the Bank or Mortgage Lion (after the
Effective Time of the Merger), and their respective officers, directors and employees, to take or
omit to take such actions, compromise or refuse to compromise such claims, incur or decline to
incur such
4
costs and expenses, to employ or engage, or not employ or engage, such persons as the
Bank deems appropriate, and no such action or failure to act by the Bank or Mortgage Lion shall in
any way impair, reduce or diminish the obligations of Indemnitor under this Agreement. Any
consultation, practice or course of dealing by the Bank with respect to Indemnitor shall not
constitute a waiver of any provision with respect to this Agreement or any obligation on the part
of the Bank to continue to do so. There is no obligation under this Agreement for the Bank to
provide Indemnitor with any contemporaneous or periodic reports or updates with respect to the
Covered Loans or any Indemnified Costs or expectations of Indemnified Costs, other than at such
times that invoices are submitted by the Bank to Indemnitor. Indemnitor may request, in writing,
copies of invoices, settlements, accounting ledgers and canceled checks with respect to the
Indemnified Costs which have been incurred or have been accrued. Except upon written authorization
of the CEO, President or CFO of the Bank, Indemnitor shall not act in an manner which either binds
the Bank or Mortgage Lion with respect to a Covered Loan or an Indemnified Cost or which purports
to be action on behalf of the Bank under this Agreement.
7. In furtherance of Indemnitor’s collaborative role hereunder, Indemnitor agrees to use his
commercially reasonable efforts to assist the Bank, and to cause other persons knowledgeable in
matters relating to Covered Loans to assist the Bank, in connection with the resolution of any
Claims relating thereto. The foregoing shall not be construed to require the full business time
and efforts of Indemnitor or for Indemnitor to incur any out-of-pocket costs with respect thereto.
In the event that it is necessary for Indemnitor to provide any testimony or respond to any
subpoenas, no fees or compensation shall be payable to Indemnitor in connection therewith. To the
extent that Indemnitor is entitled, under the terms of the Merger Agreement or the bylaws of any of
Mortgage Lion, Monticello Bank, CapitalSouth Bank or CapitalSouth to any indemnification with
respect to any matter relating to the Covered Loans, such costs of indemnification shall be
considered an Indemnified Cost hereunder.
8. Indemnitor represents and warrants that Indemnitor has provided the Bank with full and
accurate information with respect to the Covered Loans and all pending or threatened claims with
respect thereto, and shall continue to do so through the Effective Time of the Merger, and
thereafter for so long as Indemnitor is in a position as an officer or director of any of Mortgage
Lion, the Bank or CapitalSouth to do so, and that such information does not omit to state any fact
necessary, in light of the statements made, to not be misleading.
9. As security for the prompt payment and performance of each of the covenants and obligations
of Indemnitor under this Agreement, including payment of the Indemnified Obligation Share (time
being of the essence with respect thereto), and payment of any enforcement costs hereunder
(collectively all of the liabilities and obligations of Indemnitor under this Agreement being
referred to as the “Obligations”), Indemnitor hereby assigns to the Bank and grants to the Bank a
security interest in the principle balance Pledged Note, excluding all interest due or to become
due on the Pledged Note, and any extensions, renewals, substitutions or novations of the Pledged
Note (collectively, the “Collateral”), and hereby deposits and pledges to the Bank the Pledged Note
and grants to the Bank a lien thereon and a security interest therein. The Pledged Note will
contain a restriction, using
5
such language as reasonably agreed to by CapitalSouth, alerting any
potential transferee of this Agreement and voiding any such transfer in violation of this
Agreement.
10. Notwithstanding anything to the contrary contained herein, but without in any manner
releasing, impairing or otherwise affecting this Agreement or the validity hereof, or the lien
hereof, in the event of any default under the terms of this Agreement, so long as Indemnitor has
not transferred the Pledged Note or any interest therein in violation of this Agreement, then the
Bank will not hold Indemnitor personally liable for payment of the obligations under this
Agreement; provided that nothing in this section shall be deemed to prejudice the
rights of the Bank to proceed against any entity or person whatsoever, including Indemnitor, and
Indemnitor shall be personally liable, to the extent of any loss, expense or liability incurred by
the Bank for (i) damages arising from any fraud or material misrepresentation by Indemnitor or any
authorized representative of Indemnitor with respect to matters presented by Indemnitor and relied
upon by the Bank in entering into this Agreement or the performance by Indemnitor of his
obligations hereunder; and (ii) the willful or grossly negligent violation by Indemnitor of any
law, ordinance, rule, regulation, permit, license, or other legal requirements applicable to
Indemnitor.
11. Indemnitor agrees that the Bank is hereby authorized to file financing statements in such
jurisdiction or jurisdictions as the Bank deems necessary or convenient in order to further perfect
its security interest in the Collateral hereunder.
12. Indemnitor hereby expressly authorizes the Bank and CapitalSouth to enter into such
arrangements as they may deem necessary or appropriate in order to permit, and Indemnitor hereby
expressly authorizes, the Bank to set off any amounts due and owing hereunder to the Bank against
sums owing by CapitalSouth under the Pledged Note to Indemnitor at the par amounts thereof.
13. Indemnitor hereby covenants and agrees that, until all of the Obligations have been paid
and performed in full, (i) without the prior written consent of the Bank, Indemnitor will not sell,
convey, or otherwise dispose of any of the Collateral, including the Pledged Note, or any interest
therein or create, incur, or permit to exist any pledge, mortgage, lien, charge, encumbrance or
security interest whatsoever in or with respect to any of the Collateral, including the Pledged
Note, or the proceeds thereof, other than that created hereby; and (ii) Indemnitor shall, at
Indemnitor’s own expense, defend the Bank’s right, title, special property and security interest in
and to the Collateral, including the Pledged Note, against the claims of any person, firm,
corporation or other entity.
14. Indemnitor shall at any time, and from time to time, upon the written request of the Bank,
execute and deliver such further documents, including, but not limited to, financing statements,
and do such further acts and things as the Bank may reasonably request to effect the purposes of
this Agreement.
15. Upon the payment and performance in full of all Obligations, this Agreement shall
terminate and the Bank shall deliver to Indemnitor the Pledged Note, as such may have been reduced
pursuant hereto.
6
16. Beyond the exercise of reasonable care to assure the safe custody of the Pledged Note
while held hereunder, the Bank shall have no duty or liability to preserve rights pertaining
thereto and shall be relieved of all responsibility for the Pledged Note upon it tendering
surrender of it to Indemnitor.
17. Indemnitor hereby agrees that nothing in this Agreement shall be construed as requiring
CapitalSouth, the Bank or Mortgage Lion to continue to operate in any mortgage loan origination
line of business or to do or not do business with any third party, such as a purchaser of Covered
Loans, or to retain or discharge any employee, independent contractor or other agent or attorney.
18. No course of dealing between Indemnitor and the Bank, nor any failure to exercise, nor any
delay in exercising, any right, power or privilege of the Bank hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any other right, power
or privilege. No waiver by the Bank shall be effective unless it is made in writing and by a duly
authorized officer or agent of the Bank, and no waiver by the Bank of any right or remedy shall
constitute a waiver of any other or future right or remedy.
19. The rights and remedies provided herein are cumulative and are in addition to and not
exclusive of any rights or remedies provided by law, including, but without limitation, the rights
and remedies of the Bank as a secured party under the Uniform Commercial Code.
20. The provisions of this Agreement are severable, and if any clause or provision shall be
held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision or part thereof in such jurisdiction
and shall not in any manner affect such clause or provision in any other jurisdiction or any other
clause or provision in this Agreement in any jurisdiction.
21. This Agreement shall not confer any rights or remedies upon any person other than the
parties hereto and their respective successors and permitted assigns. Nothing herein shall be
construed as creating any obligation or constituting any admission of liability with respect to any
claims with respect to a Covered Loan.
22. This Agreement may be executed in one or more counterparts, each of which shall be deemed
an original but all of which together will constitute one and the same instrument. This Agreement
may be executed and delivered by fax or email of a manually signed copy hereof.
23. All notices, requests, demands, claims, and other communications hereunder shall be in
writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly
given (i) upon hand delivery, (ii) one (1) business day following the date sent when sent by
overnight delivery and (iii) three (3) business days following the date mailed when mailed by first
class, registered or certified mail and postage prepaid at the following address:
7
If to CapitalSouth or the Bank:
With a copy to:
Xxxxxxx Xxxxx Xxxx & White LLP
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: J. Xxxx Xxxxxxx, Jr.
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: J. Xxxx Xxxxxxx, Jr.
If to the Indemnitor:
Xxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
With a copy to:
Miller, Hamilton, Xxxxxx & Xxxx, LLC
000 Xxxxxxxx Xxxx Xxxxxxxxx
Xxxxx X000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, III
000 Xxxxxxxx Xxxx Xxxxxxxxx
Xxxxx X000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, III
Any party may send any notice, request, demand, claim, or other communication hereunder to the
intended recipient at the address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended recipient. Any party may
change the address to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other party notice in the manner herein set forth.
24. This Agreement shall be governed by and construed in accordance with the internal laws of
the State of Delaware without giving effect to any conflict of law provision.
25. No amendment of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by each of the parties. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
8
26. The parties have participated jointly in the negotiation and drafting of this Agreement.
In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the provisions of this
Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder at the time at which it speaks,
unless the context requires otherwise. The word “including” shall mean including without
limitation. The parties intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant. The Bank shall be entitled
to rely on the representations, warranties and covenants of the Seller contained in this Agreement
notwithstanding any examination or investigation of any related matters performed by the Bank.
27. Whenever used in this Agreement, the singular number shall include the plural and the
plural the singular. Pronouns of one gender shall include all genders. Accounting terms used and
not otherwise defined in this Agreement shall have the meanings determined by, and all calculations
with respect to accounting and financial matters unless otherwise provided for herein, shall be
computed in accordance with generally accepted accounting principles, consistently applied.
References herein to articles, sections, paragraphs, subparagraphs or the like shall refer to the
corresponding articles, sections, paragraphs, subparagraphs or the like of this Agreement. The
words “hereof,” “herein,” and terms of similar import shall refer to this Agreement. Unless the
context clearly requires otherwise, the use of the terms “including,” “included,” “such as,” or
terms of similar meaning, shall not be construed to imply the exclusion of any other particular
elements.
28. The parties hereto, by executing this Agreement, WAIVE THEIR RIGHT TO TRIAL BY JURY of
disputes, claims or controversies between themselves or any of their respective officers,
directors, partners, employees, shareholders, affiliates or agents (such non-signatories being the
intended third party beneficiaries of this Agreement with respect solely to this Section 28) and
instead agree that ANY AND ALL CONTROVERSIES AND CLAIMS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE BREACH THEREOF, SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN ACCORDANCE
WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION THEN IN EFFECT. Any
such arbitration proceedings shall be and remain confidential. The panel of arbitrators for any
such arbitration shall consist of three members of the American Arbitration Association, one of
whom shall be selected by CapitalSouth, one of whom shall be selected by Indemnitor, and the third
who will be selected by the other two. Judgment upon the decision rendered by the arbitrators may
be entered in any court having jurisdiction thereof. The parties specifically acknowledge that
this Agreement evidences a transaction involving, affecting, affected by, and a part of, interstate
commerce and that this
9
Agreement to arbitrate is governed by and enforceable under 9 U.S.C. §§ 1 et
seq. The place of arbitration shall be Birmingham, Alabama.
29. This Agreement is a continuing agreement until all Obligations hereunder have been
satisfied.
30. Indemnitor acknowledges that the statute of limitations applicable to this Agreement shall
begin to run only upon Indemnitor’s failure or refusal to pay any of the Obligations hereunder;
provided that, if subsequent to such default if the Bank reaches any agreement with respect to such
Obligations or agrees to forebear the enforcement of its claims against Indemnitor, the statute of
limitations shall be reinstated for its full duration until Indemnitor again defaults.
31. This Agreement shall inure to the benefit of the Bank, its successors and assigns, and
shall be binding upon Indemnitor and his respective heirs, executors, administrator, successors and
assigns.
32. Indemnitor and CapitalSouth hereby agree that the Non-Pledged Note shall be structured to
contain terms that allow a portion of the Non-Pledged Note to be converted from time to time and at
such time as mutually reasonably agreed upon by Indemnitor and CapitalSouth, and consistent with
applicable securities laws, to the extent that such conversion will allow Indemnitor to own in the
aggregate, immediately following the conversion, the number of shares of common stock up to that
Indemnitor would have received upon the closing of the transactions contemplated by the Merger
Agreement assuming that the price per share of CapitalSouth common stock was the closing price as
of February 28, 2007. The conversion price per share of common stock of CapitalSouth shall be the
average of the high and low prices as of the date immediately prior to such conversion. The shares
issued upon conversion of the Non-Pledged Note shall be unregistered and, in addition, such
unregistered shares received by Indemnitor shall be subject to customary transfer restrictions and
any others which are applicable to other shares of CapitalSouth common stock owned by Indemnitor as
of the conversion date. CapitalSouth hereby agrees to grant to Indemnitor certain registration
rights with respect to the shares of CapitalSouth common stock that Indemnitor receives pursuant to
his conversion of the Non-Pledged Note, and that such rights are contained in Exhibit A
attached hereto.
33. This Agreement (including the documents referred to herein) constitutes the entire
agreement between the parties with respect to the Obligations and supersedes any prior
understandings, agreements, or representations by or between the parties, written or oral, to the
extent they related in any way to the subject matter hereof.
[Signature Page Follows]
10
IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be executed
and delivered as of the date first above written.
| CAPITALSOUTH BANCORP |
||||
| By: | /s/ W. Xxx Xxxxxxx | |||
| Its: Chairman and Chief Executive Officer | ||||
| CAPITALSOUTH BANK |
||||
| By: | /s/ W. Xxx Xxxxxxx | |||
| Its: Chairman and Chief Executive Officer | ||||
| /s/ Xxxxx X. Xxxxx [L.S.] | ||||
| Xxxxx X. Xxxxx | ||||
11
STATE OF ALABAMA
|
) | |
| : | ||
JEFFERSON COUNTY
|
) |
I, the undersigned, a notary public in and for said county in said state, hereby certify that
W. Xxx Xxxxxxx, whose name as Chairman and Chief Executive Officer of CAPITALSOUTH BANCORP, a
Delaware corporation and a registered bank holding company, is signed to the foregoing instrument,
and who is known to me, acknowledged before me on this day that, being informed of the contents of
said instrument, he, as such officer and with full authority, executed the same voluntarily for and
as the act of said corporation.
Given
under my hand and official seal this 14th day of September, 2007.
| /s/ Xxxxxxx X. Xxxxx | ||||
| Notary Public | ||||
[NOTARIAL SEAL]
|
My commission expires: | July 2, 2011 | ||
12
STATE OF ALABAMA
|
) | |
| : | ||
JEFFERSON COUNTY
|
) |
I, the undersigned, a notary public in and for said county in said state, hereby certify that
W. Xxx Xxxxxxx, whose name as Chairman and Chief Executive Officer of CAPITALSOUTH BANK, an Alabama
banking corporation, is signed to the foregoing instrument, and who is known to me, acknowledged
before me on this day that, being informed of the contents of said instrument, he, as such officer
and with full authority, executed the same voluntarily for and as the act of said corporation.
Given
under my hand and official seal this 14th day of September, 2007.
| /s/ Xxxxxxx X. Xxxxx | ||||
| Notary Public | ||||
[NOTARIAL SEAL]
|
My commission expires: | July 2, 0000 | ||
00
XXXXX
XX XXXXXXX
|
) | |
| : | ||
XXX
XXXX COUNTY
|
) |
I, the undersigned, a notary public in and for said county in said state, hereby certify that
Xxxxx X. Xxxxx, whose name is signed to the foregoing instrument, and who is known to me,
acknowledged before me on this day that, being informed of the contents of said instrument, he
executed the same voluntarily on the day the same bears date.
Given
under my hand and official seal this 14th day of September, 2007.
| /s/ Xxxxx Xxxxxxxxx | ||||
| Notary Public | ||||
[NOTARIAL SEAL]
|
My commission expires: | March 4, 2008 | ||
14
Exhibit A
Registration Rights
1. Registration Rights. CapitalSouth covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term “register”, “registered,” and “registration” refer to a
registration effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act of 1933, as amended (the “Act”), and the declaration or
ordering of effectiveness of such registration statement or document; and
(b) The term “Registrable Securities” means (A) any shares of CapitalSouth’s common
stock, $1.00 par value per share (the “Common Stock”), issuable or issued to Xxxxx upon
conversion of the Non-Pledged Note, (B) shares of any class of capital stock or other securities
into which or for which any such shares of Common Stock shall have been converted or exchanged
pursuant to any recapitalization, reorganization, merger or consolidation of CapitalSouth or sale
of all or substantially all of the assets of CapitalSouth, and (C) any other shares of Common Stock
issued in respect of such shares described in clauses (A) and (B) of this definition (because of
stock splits, stock dividends, reclassifications, recapitalizations, or similar events), excluding
in all cases, however, (x) any Registrable Securities sold by a person in a transaction in which
such person’s rights under this Section 1 are not assigned, or (y) any Registrable Securities sold
to or through a broker or dealer or underwriter in a public distribution or a public securities
transaction.
1.2 Piggyback Registration. If (but without any obligation to do so) CapitalSouth
proposes to register any of its securities under the Act in connection with the public offering of
such securities solely for cash within three (3) years of the date hereof (other than (i) a
registration relating solely to the sale of securities to participants in a CapitalSouth stock
plan, or (ii) a registration on any form which does not include substantially the same information
as would be required to be included in a registration statement covering the sale of the
Registrable Securities), CapitalSouth shall, at such time, promptly give Xxxxx written notice of
such registration. Upon the written request of Xxxxx given to CapitalSouth within fifteen (15) days
after mailing of written notice by CapitalSouth, CapitalSouth shall, subject to the provisions of
Section 1.6 hereof, use its reasonable efforts to cause to be registered under the Act all of the
Registrable Securities that Xxxxx has requested to be registered.
1.3 Obligations of CapitalSouth. Whenever required under this Section 1 to effect the
registration of any Registrable Securities, CapitalSouth shall, in a commercially prompt manner:
(a) Prepare and file with the Securities and Exchange Commission (the “SEC”) a registration
statement with respect to such Registrable Securities and use its reasonable efforts to cause such
registration statement to become effective, and, upon the request of Xxxxx, keep such registration
statement effective for the earlier of 120 days or until the distribution described in the
registration statement has been completed;
15
(b) Prepare and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish to Xxxxx, within a reasonable time, such numbers of copies of the registration
statement, each amendment and supplement thereto, the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and such other documents as he may
reasonably request in order to facilitate the disposition of Registrable Securities owned by him;
(d) Use its reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or blue sky laws of such jurisdictions as shall
otherwise be applicable to securities registered by CapitalSouth;
(e) In the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement and any other customary agreements, in usual and customary form,
with the underwriters of such offering and take all such actions requested to expedite or
facilitate the disposition of shares. Xxxxx, as a participant in such underwriting, shall also
enter into and perform his obligations under any such agreements;
(f) Notify Xxxxx at any time when a prospectus relating thereto is required to be delivered
under the Act of the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing;
(g) Cause all such Registrable Securities to be listed, prior to the date of the first sale of
such Registrable Securities pursuant to such registration, on each securities exchange on which
similar securities issued by CapitalSouth are then listed and, if not so listed, to be listed with
the National Association of Securities Dealers automated quotation system (NASDAQ); and
(h) In the event of the issuance of any stop order suspending the effectiveness of a
registration statement, or of any order suspending or preventing the use of any related prospectus
or suspending the qualification of any Registrable Securities included in such registration
statement for sale in any jurisdiction, CapitalSouth will use its commercially reasonable efforts
promptly to obtain the withdrawal of such order.
1.4 Furnish Information. It shall be a condition precedent to the obligations of
CapitalSouth to take any action pursuant to this Section 1 with respect to the Registrable
Securities of Xxxxx that Xxxxx shall furnish to CapitalSouth such information regarding himself,
the Registrable Securities held by him, and the intended method of disposition of such securities
as shall be required to effect the registration of Xxxxx’x Registrable Securities.
16
1.5 Expenses of CapitalSouth Registration. CapitalSouth shall bear and pay all
expenses incurred in connection with any registration, filing or qualification of Registrable
Securities with respect to the registrations pursuant to Section 1.2 hereof, including (without
limitation) all registration, filing, and qualification fees, printers’ and accounting fees
relating or apportionable thereto, but excluding underwriting discounts and commissions relating to
Registrable Securities and the fees and disbursements of counsel for Xxxxx.
1.6 Underwriting Requirements. In connection with any offering involving an
underwriting of securities being issued by CapitalSouth, CapitalSouth shall not be required under
Section 1.2 hereof to include any of Xxxxx’x securities in such underwriting unless he accepts the
terms of the underwriting as agreed upon between CapitalSouth and the underwriters selected by it
(or by other persons entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success of the offering by
CapitalSouth. If the total amount of securities, including Registrable Securities requested by
Xxxxx to be included in such offering, exceeds the amount of securities sold that the underwriters
determine in their sole discretion is compatible with the success of the offering, then
CapitalSouth shall be required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their sole discretion will
not jeopardize the success of the offering.
1.7 Delay of Registration. Xxxxx shall not have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result of any controversy
that might arise with respect to the interpretation or implementation of this Section 1.
1.8 Assignment of Registration Rights. The rights to cause CapitalSouth to register
Registrable Securities pursuant to this Section 1 may not be assigned by Xxxxx to a transferee or
assignee without the prior written consent of CapitalSouth, which may be withheld in CapitalSouth’s
sole discretion.
2. Miscellaneous Provisions.
2.1 Descriptive Headings. The descriptive headings in this Exhibit A have been
inserted for convenience only and shall not be deemed to limit or otherwise affect the construction
of any provisions hereof.
2.2 Expenses. If any action at law or in equity is necessary to enforce or interpret
the terms of this Exhibit A, the prevailing party shall be entitled to reasonable attorney
fees, costs and necessary disbursements in addition to any other relief to which such party may be
entitled.
2.3 Stock Splits. All references to numbers of shares in this Exhibit A shall
be appropriately adjusted to reflect any stock dividend, split, combination or other
recapitalization of shares by CapitalSouth occurring after the date of this Exhibit A.
17
